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Auditing Cash

Hello,

I don't have much experience as an auditor, but how important is it for cash to reconile to the bank? I am working on an audit and note that our client hasn't been able to fully reconcile to the bank. The difference is below materiality, but above the trival threshold (can you put materiality on something like a bank reconcilation? positive/negaitve transactions could offset making the difference much lower). I talked to my manager and they are okay with it not reconiling, yet I think it's kind of a red flag that the client cannot perform a bank reconcilation. How can you even perform audit testing on a reconcilation that doesn't reconcile? Wanted to get advice from more senior auditors on how to handle something like this. Thanks!